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Accumulating wealth Thumbnail

Accumulating wealth

The power of compound interest 

Pre-authorized contribution plan 

The following charts demonstrate how monthly contributions, aided by the power of compound interest, can add up over the years. 

Assuming 3 per cent compound annual return1 ($) 

Monthly contribution 5 years  10 years  15 years  20 years 

50 

3,231 

6,986 

11,347 

16,413 

100 

6,464 

13,973 

22,696 

32,828 

200 

12,928 

27,947 

45,393 

65,659 

300 

19,393 

41,921 

68,090 

98,489 

500 

32,322 

69,869 

113,485 

164,149 

800 

51,716 

111,792 

181,577 

262,640 

1,000 

64,646 

139,740 

226,971 

328,300 


Assuming 5 per cent compound annual return2 ($) 

Monthly contribution  5 years  10 years  15 years  20 years 

50 

3,399 

7,762 

13,362 

20,549 

100 

6,799 

15,527 

26,727 

41,101 

200 

13,600 

31,055 

53,456 

82,204 

300 

20,401 

46,583 

80,185 

123,307 

500 

34,002 

77,639 

133,642 

205,514 

800 

54,404 

124,224 

213,829 

328,824 

1,000 

68,005 

155,281 

267,287 

411,031 


1,2  Rates of return are used only to illustrate the effects of compound growth and are not intended to forecast future values or returns on investments in any mutual or segregated fund. It is assumed that all monthly contributions are made at the beginning of the period. 

Asset allocation mixes 

The following list of diversified portfolios covers the spectrum of risk and return profiles designed to meet various investment goals. 

Conservative 

  • Income generation 
  • Emphasis on preserving capital 


Moderate 


  • Income generation 
  • Long-term growth 
  • Slightly greater emphasis on fixed income portion 


Balanced 

  • Long-term growth consistent with safety of capital 
  • Slightly greater emphasis on equities 


Growth 

  • Long-term growth with little need to generate income 
  • Increased exposure to foreign equities 


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Global diversification 

Canada represents less than five per cent of the world stock market capitalization.1 When you consider the fact that over half2 of Canada’s stock market is confined to the financial, energy and materials sectors, if you limit your client’s portfolio to Canadian investments, you may be missing out on a number of world-class opportunities. 

1 Source: As per MSCI ACWI weightings as of September 30, 2019. When you consider the fact that over half2 

2 Source: Morningstar Direct as of September 30, 2019. of Canada’s stock market is confined to the financial, energy and materials sectors, if you limit your client’s portfolio to Canadian investments, you may be missing out on a number of world-class opportunities. 

Mutual fund sector weights – Canadian Equity Category Average vs. International Equity Category Average 


Mutual fund sector weights – Canadian Equity Category Average vs. International Equity Category Average


Source: Morningstar Direct as at September 30, 2020. For illustration purposes only. 

The growth of a $10,000 portfolio with and without foreign content 

30 years (October 1, 1989 – September 30, 2019) 


The growth of a $10,000 portfolio with and without foreign content   30 years (October 1, 1989 – September 30, 2019)


Source: Morningstar Direct as at September 30, 2020. For illustration purposes only. This is based on a hypothetical scenario. 

Yield spectrum 

While Canadian government bond yields may be low, there’s a world of income out there worth exploring. The chart illustrates the wide spectrum of choices available to portfolio managers looking to build a globally diversified income portfolio. 


While Canadian government bond yields may be low, there’s a world of income out there worth exploring. The chart to the right illustrates the wide spectrum of choices available to portfolio managers looking to build a globally diversified income portfolio.

Sources: Bloomberg as of September 30, 2020.